Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
DECISION
JARDELEZA, J.:
These are consolidated petitions for review on certiorari[1] under Rule 45 of the Rules
of Court both filed by petitioner Dale Strickland (Strickland): (1) G.R. No. 193782 is against
respondent Ernst & Young LLP (EYLLP) assailing the Decision[2] dated June 17,
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 102805 which annulled and set
aside the Orders[3] of the Regional Trial Court, Branch 150, Makati City, ordered EYLLP
to be dropped as defendant in Civil Case No. 05-692, and referred the dispute between
Strickland and EYLLP to arbitration;[4] and (2) G.R. No. 210695, which is against
respondent Punongbayan & Araullo (PA), and assails the Decision[5] dated August 5,
2013 of the CA in CA-G.R. SP No. 120897 which declared null and void the Orders[6] of
the RTC and directed it to suspend proceedings in the same Civil Case No. 05-692.[7]
Civil Case No. 05-692 is a complaint[8] filed by Strickland against, among others,
respondents PA and EYLLP praying for collection of sum of money.
On March 26, 2002, National Home Mortgage Finance Corporation (NHMFC) and PA
entered into a Financial Advisory Services Agreement (FASA) for the liquidation of the
NHMFC's Unified Home Lending Program (UHLP). At the time of the engagement, PA
was the Philippine member of respondent global company, EYLLP. In the March 26,
2002 letter[9] of PA to NHMFC confirming their engagement as exclusive Financial
Advisor for the UHLP Project, PA is designated as P&A/Ernst & Young.[10]
During this period, Strickland was a partner of EYLLP seconded to respondent Ernst &
Young Asia Pacific Financial Solutions (EYAPFS),[11] who was listed in the FASA as
member of the Engagement Team, in pertinent part:
Significantly, Strickland played a role in negotiating the FASA between PA and NHMFC.
In a letter dated April 15, 2002, PA wrote Strickland to formalize the working
relationship between PA/EYLLP and EY/APFS for the FASA with NHMFC:
Dear Dale,
Ernst & Young, as represented by Punongbayan & Araullo, the Ernst & Young
member firm in the Philippines (P&A/ERNST & YOUNG) and Ernst & Young
Asia Pacific Solutions LLC (EY/APFS) was chosen as the exclusive Financial
Advisor for National Home Mortgage Finance Corporation (NHMFC) with
respect to the liquidation of its Php40 Billion Unified Home Lending Program
(UHLP) portfolio (or the "Transaction"). P&A/ERNST & YOUNG acted as the
contracting party, on behalf of EY/APFS, and signed the contract with NHMFC
to officially kick-off the engagement.
In line with this, we would like to underscore several issues, which would
formalize the working relationship between P&A/ERNST & YOUNG and
EY/APFS.
Once again, we wish to express our appreciation for the opportunity you
have accorded us to undertake this pursuit with you. We look forward to working
with you in this engagement.
By June 6, 2002, EYLLP wrote PA of the termination of its membership in EYLLP.[14] Despite
the termination, the working relationship among the parties continued. In an assignment
letter[15] dated November 15, 2002, EYLLP confirmed Strickland's assignment to
Manila as a partner and summarized the working arrangement, specifying the
following provisions: (1) assignment and the terms; (2) compensation and benefits;
(3) tax; (4) change of circumstances; (5) repatriation; and (6) acceptance.
In July 2004, the transactional relationship between the parties went awry. In an
exchange of letters, notice was given to NHMFC of PA's intention to remove Strickland
from the NHMFC Engagement Team as a result of Strickland's resignation from EYLLP
and/or EYAPFS effective on July 2, 2004.[16] Responding to NHMFC's concerns on the
removal of Strickland from the UHLP Project and his replacement by Mark Grinis
(Grinis), EYAPFS' Managing Director, EYLLP reiterated Grinis' qualifications and affirmed
its team of professionals' dedication of "all the time necessary to close this transaction
and to make NHMFC [their team's, headed by Grinis,] first priority."[17]
Since NHMFC was intent on retaining Strickland's services despite his separation from
EYLLP and/or EYAPFS, the parties entered into negotiations to define Strickland's
possible continued participation in the UHLP Project. PA, NHMFC, and Strickland
exchanged letters containing proposed amendments to cover the new engagement and
Strickland's participation within the UHLP Project.[18] No actual written and final
agreement among the parties amending the original engagement letter of March 26,
2002 materialized.
On August 20, 2004, PA wrote a letter,[19] signed by its President/Chairman & CEO,
Benjamin R. Punongbayan, to NHMFC to initiate discussions on a "mutual voluntary
termination of the NHMFC Agreement."[20]
On November 18, 2003, PA and NHMFC executed an addendum to the March 26, 2002
original engagement letter covering additional terms of the financial advisory services.
[21]
By May 23, 2005, counsel for Strickland wrote PA asking for "equitable compensation
for professional services" rendered to NHMFC on the UHLP Project from the time of his
separation from EYLLP and/or EYAPFS in July 2004 "up and through the recent Signing
and Closing Ceremony held on 22 April 2004 and his continued provision of services as
the final closing approaches."[26]
Thus, [Strickland] filed a Complaint, dated May 17, 2005, which included
[EYAPFS], [PA] and NHMFC among the defendants, seeking the following
reliefs:
The trial court admitted the Amended Complaint in its Order, dated
December 6, 2006. Subsequently, it also issued an Order, dated January 2,
2007, denying [EYAPFS'] Motion To Refer to Arbitration, thus:
SO ORDERED."
SO ORDERED."
Pursuant to the said ruling, x x x [PA] filed a Motion to Suspend with Motion
to Reset Pre-Trial Conference on the ground that any settlement during the
arbitration between [EYLLP] and Strickland may cause prejudice to [PA] ifthe
trial court proceedings are continued as Strickland's cause of action against
[PA] was merely incidental to that against [EYLLP].
[PA's] Motion, however, was denied in the first assailed Order, dated March
11, 2011, the dispositive portion of which reads:
PA filed a motion for reconsideration which the RTC denied in its May 19, 2011 Order.
[29] Thus, PA filed a petition for certiorari before the CA docketed as CA-G.R. SP No.
120897, alleging grave abuse of discretion in the RTC's Orders denying its motion to
suspend proceedings.[30]
As adverted to, the CA annulled the March 11 and May 19, 2011 Orders:
1. In G.R. No. 193782, whether the CA erred in referring the dispute between
Strickland and EYLLP to arbitration and ordering that EYLLP be dropped as defendant in
Civil Case No. 05-692.
1.1 Whether the Partnership Agreement[34] was properly alleged and proven according
to Section 7, Rule 8 of the Rules of Court on actionable documents; and
1.2 Whether the dispute between Strickland and EYLLP based on Strickland's complaint
is arbitrable.
2. In G.R. No. 210695, whether the CA erred anew when it suspended the proceedings
in Civil Case No. 05-692 pending the arbitration between Strickland and EYLLP.
2.2 Whether Strickland's causes of action against all the defendants are intricately
intertwined such that the separate causes of action against PA and the other impleaded
defendants cannot independently proceed from the arbitration between Strickland and
EYLLP.
In annulling the January 2, 2007 and January 16, 2008 Orders of the RTC, the CA ruled
that: (1) EYLLP substantially complied with Section 7, Rule 8 of the Rules of Court o
setting forth actionable documents in a pleading; (2) the Partnership Agreement indeed
contained a valid arbitration clause; and (3) applying processual presumption, albeit
EYLLP failed to prove the applicable foreign law, the dispute between EYLLP and
Strickland falls under the category of international commercial arbitration.[35]
Strickland contends that the CA's referral of the dispute between EYLLP and Strickland
to arbitration is grave error since EYLLP failed to properly allege and prove the
Partnership Agreement. Absent an actionable Partnership Agreement, there is no
existing arbitration clause.[36]
We are not persuaded. We do not find reversible error in the Decision of the CA in CA-
G.R. SP No. 102805.
In this case, EYLLP initially only quoted the provisiOn of the Partnership Agreement on
Dispute Resolution, including a section on Arbitration, in its answer[37] dated February
15, 2006. Eventually, it submitted a copy of the Partnership Agreement in a
manifestation[38] dated March 15, 2006. Thus, we agree with the holding of the CA that
EYLLP substantially, and ultimately, complied with the provision given that Strickland
himself did, and does not even deny, the Partnership Agreement nor the arbitration
clause.
xxxx
The CA ruled that arbitration cannot be ordered in this case, since petitioner
alleged that the contract between the parties did not exist or was invalid and
arbitration is not proper when one of the parties repudiates the existence or
validity of the contract. x x x
xxxx
However, the Gonzales case, which the CA relied upon for not ordering
arbitration, had been modified upon a motion for reconsideration in this
wise:
In so ruling that the validity of the contract containing the arbitration agreement
does not affect the applicability of the arbitration clause itself, we then applied
the doctrine of separability, thus:
Here, we consider the Partnership Agreement which explicitly provides for alternative
dispute resolution:
Plainly, considering that the arbitration clause is in itself a contract, the setting forth of
its provisions in EYLLP's answer and in its motion to refer to arbitration,[42] coupled
with the actual submission by EYLLP of the Partnership Agreement, complies with the
requirements of Section 7, Rule 8 of the Rules of Court which Strickland should have
specifically denied.[43]
We note that while the cases before us have a foreign element involving foreign parties
and international transactions, the parties do not question the jurisdiction of our courts
to hear and decide the case. The parties quibble only on whether the dispute between
Strickland and EYLLP should be referred to arbitration despite Strickland's alleged
causes of action based on tortious conduct of the parties in refusing to compensate him
for services rendered. Moreover, in relation to the other defendants, specifically
respondent PA, the issue pertains to the suspension of the proceedings in Civil Case No.
05-692 pending resolution of the arbitration between Strickland and EYLLP.
Thus, we agree with the CA's ruling on the nature of the contract between Strickland
and EYLLP, and its application of our commercial arbitration laws to this case:
x x x "[T]he International Law doctrine of presumedidentity approach or
processual presumption comes into play. Where a foreign law is not pleaded,
or, even if pleaded, is not proved, the presumption is that foreign law is the
same as ours."
To determine the applicable law here, the nature of the arbitration sought to
be undertaken must be looked at. The ADR Act defines domestic arbitration
negatively by stating that it is one that is not international as defined in the
Model Law[]. In turn, Article 1 (3) of the Model Law provides that an
arbitration is international if:
For the Model Law to apply, however, the arbitration should also be
commercial. The explanatory footnote to Article 1(l) of the Model Law
explains that "[t]he term 'commercial' should be given a wide interpretation
so as to cover matters arising from all relationships of a commercial nature,
whether contractual or not." It also states that relationships of a commercial
nature include the following transactions among others:
The meaning attached to the term "commercial" by the Model Law is broad
enough to cover a partnership. The Civil Code x x x defines a partnership as
a contract where "two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of
dividing the profits among themselves." Hence, considering that EYLLP and
Strickland had a partnership relationship, which was not changed during his
assignment [to] Manila for the Project, the request for arbitration here has a
commercial character. The dispute between the said parties relates to
Strickland's and EYLLP's association with each other.[45] x x x (Emphasis and
underscoring in the original; citations omitted.)
The following factors further militate against Strickland's insistence on Philippine courts
to primarily adjudicate his claims of tortious conduct, and not commercial arbitration,
as stipulated in the Partnership Agreement:
1. From his complaint and amended complaint, Strickland's causes of action against
EYLLP and PA hinge primarily on contract, i.e., the Partnership Agreement, and the
resulting transactions and working relationship among the parties, where Strickland
seeks to be paid.[46]
I. ASSIGNMENT
Terms of Assignment
xxxx
(14)(9) When the NHMFC Agreement was signed, [Strickland] was a Partner
in E&Y and held the title of Managing Director of Ernst & Young Asia Pacific
Financial Solutions LLC ("EYAPFS"), a 100% owned and controlled subsidiary
of Ernst & Young LLP ("E&Y").[48] x x x
On the whole, the dispute between Strickland and EYLLP, even considering the former's
allegations of tortious conduct, were properly referred by the CA to arbitration.
II
In its Decision in CA-G.R. SP No. 120897, the CA suspended the proceedings in Civil
Case No. 05-692, finding that: (1) PA is an agent of EYLLP who cannot be sued by Strickland
on the contract of employment between Strickland and EYLLP/EYAPFS; and (2) even
without delving into the contract of agency between PA and EYLLP/EYAPFS, "a comparison
of the causes of action against [EYLLP/EYAPFS] and x x x PA would justify a suspension of
the proceedings in the trial court."[49]
Strickland maintains, however, that the CA's suspension of the proceedings in Civil Case
No. 05-692 is grave error because: (1) the Partnership Agreement containing the
arbitration clause was not sufficiently proved and authenticated;[50] (2) the CA should
have ordered the RTC to conduct an evidentiary hearing on the factual assertions that
PA is an agent of EYLLP/EYAPFS and that the causes of action of Strickland against
EYLLP are intricately intertwined with those against PA and the other defendants;[51]
and (3) Strickland has distinct causes of action against other defendants such as
NHMFC.[52]
The records bear out in at least two documents that PA represented EYLLP/EYAPFS in
the FASA with NHMFC for the UHLP Project, to wit:
Dear Dale,
Ernst & Young, as represented by Punongbayan & Araullo, the Ernst & Young
member firm in the Philippines (P&A/ERNST & YOUNG) and Ernst & Young
Asia Pacific Solutions LLC (EY/APFS) was chosen as the exclusive Financial
Advisor for National Home Mortgage Finance Corporation (NHMFC) with
respect to the liquidation of its Php40 Billion Unified Home Lending Program
(UHLP) portfolio (or the "Transaction"). P&A/ERNST & YOUNG acted as
the contracting party, on behalf of EY/APFS, and signed the contract
with NHMFC to officially kick-off the engagement.[53] (Emphasis
supplied.)
2. The March 26, 2002 letter covering the FASA between NHMFC and PA, where PA, as
one of the parties, was designated in all references as "P&A/ERNST & YOUNG" or
"P&A/E&Y."[54]
This fact of agency relationship between PA and EYLLP cannot be denied and avoided
by Strickland, given Articles 1868 and 1873 of the Civil Code which provides, thus:
Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with
the consent or authority of the latter.
xxxx
Having established the fact of agency, there is no question that P&A derives
its authority for the UHLP liquidation from Ernst & Young Asia. As such
agent, P&A cannot sue and be sued on the contract of employment between
Strickland and Ernst & Young Asia. As explained by a recognized authority in
civil law:
In this case, the conflict arose from the terms of Strickland's employment
contract with Ernst & Young Asia and P&A's involvement in the same was a
mere consequence that the termination occurred while the UHLP was
ongoing. The fact of agency in itself and the aforequoted discussion of its effects
shows that [PA's] liability is anchored on that of Ernst & Young Asia, giving rise
to a reason why the trial court's proceedings must be suspended in the light
of the pending arbitration proceedings between [PA's] principal[, EYLLP,] and
x x x Strickland.[55] (Emphasis in the original; citations omitted.)
Second. The confusion arises because Strickland insists on foregoing suit on his
Partnership Agreement with EYLLP precisely because such has an arbitration clause and
a choice of law provision. It is quite apparent that Strickland wishes to sue all the
defendants before our courts based on a combination of causes of action for violation of
obligations arising out of tort,[58] quasi-contract,[59] and contract.[60] However,
Strickland's allegations in both the complaint and amended complaint are undoubtedly
hinged, and unavoidably linked, to his former contractual relationship with EYLLP to
which the present controversy among all the parties can be traced:
(28)(23) It is likely that one of the reasons that P&A refused to compensate
him was because of the influence of [EYLLP]. It is believed that [EYLLP]
sought to punish Mr. Strickland by trying to prevent him from receiving
compensation despite [EYLLP's] deliberate and reckless abandonment of its
contractual responsibilities. NHMFC appears to have refused to compensate
[Strickland] because it was not contractually bound by the Agreement to
compensate him, although NHMFC believed it could oblige [Strickland] to
complete the work because of [his] designation as Project Manager.
In a hodge podge of allegations, Strickland, without being a party to the FASA between
NHMFC and PA/EYLLP, insists on the continuation of his suit contending that his
designation as "Lead Due Diligence Partner," forming part of the Engagement Team, entitles
him to equitable compensation. Thus, Strickland maintains that the proceedings in Civil
Case No. 05-692 should not have been suspended, and should then proceed independently
of the arbitration between Strickland and EYLLP.
We do not agree. We do not find the designation of Strickland in the Engagement Team
of the FASA as a stipulation pour atrui. Article 1311, paragraph 2 of the Civil Code
reads:
Art. 1311. x x x
Considering the clear applicability of the Partnership Agreement and the terms of the
arbitration clause, and absent a clear right-duty correlative[63] which supports
Strickland's causes of action, the CA certainly did not err in suspending the proceedings
in CA-G.R. SP No. 120897.
Third. We are not unaware of previous holdings where we disallowed suspension of trial
pending arbitration, even simultaneous arbitration proceedings and trial, where the
issue before the court could not then be speedily and efficiently resolved in its entirety.
We emphasized that the object of arbitration (that is, to expedite the determination of
a dispute) would only be served if the trial court hears and adjudicates the case in a
single and complete proceeding.[64]
The following circumstances underscore the high probability of an expeditious
resolution of the conflict with the referral to arbitration of the dispute between EYLLP
and Strickland and the succeeding suspension of the proceedings before the RTC in
Civil Case No. 05-692:
1. As previously stated, these cases comprise of a foreign element, involving foreign parties
and international transactions. While the parties have not questioned the jurisdiction of
our courts, the RTC may still refuse to assume jurisdiction.[65]
3. Strickland himself admits that as Partner of EYLLP, he was assigned to various parts
of Asia. He has also not denied that he was seconded to EYAPFS because of certain tax
consequences of his different assignments.[67] In fact, in his additional cause of action
against EYLLP, Strickland alleged, among others, that EYLLP did not pay his correct
taxes making him liable for these.[68] Evidently, the real dispute between Strickland
and EYLLP falls within its Partnership Agreement involving its own choice of law
provision.
In Crescent Petroleum, Ltd. v. M/V "Lok Maheshwari,"[69] the Court used balancing of
basic interest to weigh the varying foreign elements of the case listed in the US case of
Lauritzen v. Larsen.[70] With Philippine law falling only under one factor as the law of
the forum where petitioner Crescent filed suit, the Court declared it inconceivable that
the Philippine court had any interest in the case that would outweigh the interests of
the involved foreign jurisdictions (Canada or India).[71] Ultimately, the Court held that:
In all, while we do not preclude Strickland from pursuing all remedies available to him,
we point out that the factual circumstances obtaining here, given that Strickland was
then partner of the global company EYLLP, the Philippines is not automatically the law
of the place of performance of the contract nor is it the only factor to be considered in
the ultimate choice-of law final analysis.
WHEREFORE, the petitions in G.R. Nos. 193782 and 210695 are DENIED. The
Decisions of the Court of Appeals in CA-G.R. SP No. 102805 dated June 17, 2010 and
CA-G.R. SP No. 120897 dated August 5, 2013 are AFFIRMED.
SO ORDERED.
Leonardo-De Castro,* (Acting Chairperson), Del Castillo, Tijam, and Gesmundo,** JJ.,
concur.
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the cases were assigned to the writer of the opinion of the Court's Division.
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's
attestation, it is hereby certified that the conclusions in the above Decision had been
reached in consultation before the cases were assigned to the writer of the opinion of
the Court's Division.
ANTONIO T. CARPIO
Senior Associate Justice***
* Designated as Acting Chairperson of the First Division per Special Order No. 2559
** Designated as Acting Member of the First Division per Special Order No. 2560 dated
[1] Rollo (G.R. No. 193782), pp. 9-48; rollo (G.R. No. 210695), pp. 34-91.
[2] Rollo (G.R. No. 193782), pp. 54-67. Penned by Associate Justice Florito S. Macalino
with Associate Justices Juan Q. Enriquez, Jr. and Ramon M. Bato, Jr. concurring.
[3] Dated January 2, 2007 and January 16, 2008, respectively, id. at 54.
[5] Rollo (G.R. No. 210695), pp. 9-21. Penned by Associate Justice Agnes Reyes-Carpio
[6] Dated March 11, 2011 and May 19, 2011, respectively, id. at 9.
[7] Id. at 20.
[11] Subsidiary of EYLLP authorized to do business within the Asia Pacific Region. Rollo
(G.R. No. 193782), pp. 54-55; rollo (G.R. No. 210695), p. 128.
[13] Id. at 787-788. Also cited in the Decision of the Court of Appeals in CA G.R. SP No.
[18] Id. at 368-369; rollo (G.R. No. 193782), p. 55; rollo (G.R. No. 210695), pp. 38,
308.
[21] Id.
[39] G.R. No. 175404, January 31, 2011, 641 SCRA 31.
and Management Pacific Corporation, G.R. No. 204197, November 2016, 810 SCRA
280, 308.
[46] See Complaint and Amended Complaint, rollo (G.R. No. 210695), pp. 127-136 and
181-211, respectively.
[56] G.R. No. 120105, March 27, 1998, 288 SCRA 267.
[64] See Del Monte Corporation-USA v. Court of Appeals, G.R. No. 136154, February 7,
2001, 351 SCRA 373, 381-382, citing Heirs of Augusto L. Salas, Jr. v. Laperal Realty
Corporation, G.R. No. 135362, December 13, 1999, 320 SCRA 610.
[65]See Crescent Petroleum, Ltd v. M/V "Lok Maheshwari," G.R. No. 155014,
November 11, 2005, 474 SCRA 623.
[67] See email thread prior to Strickland's assignment to Manila to ensure that he
maximizes his compensation benefits. Rollo (G.R. No. 210695), pp. 223-256.
[68] Id. at 197-201.
[69] Supra.
[71] Crescent Petroleum, Ltd. v. M/V "Lok Maheshwari," supra note 65 at 641.
*** Per Sec. 12 of Republic Act No. 296, The Judiciary Act of 1948, as amended.